International Trade Committee on Nov. 9th, 2023

[Yuliya Kovaliv]

Thank you.

Indeed, that's another chapter that will help and that will have an impact not only on trade. The agreement in the chapter recognizes the importance of promoting women's rights and gender equality, including in business, in small and medium-sized businesses, and trade.

I can tell you that, from Ukraine's perspective, it's very important now. The majority of the defenders of Ukraine are men who went to the front line, so today Ukrainian women have an additional role to participate in economic life to support their families. Within the horror of war, we want to use this as an opportunity to support Ukrainian women to be more active in the economic sector and to engage them to participate more in business and trade.

The Ukrainian government has launched programs, together with the support of our partners, that will help Ukrainian women get educated on how to start a business and how to get into markets. Of course, this chapter is not only symbolic. It also gives both our countries further tools to develop and support women in economic activity and in trade between our countries.

[The Vice-Chair, Conservative, Kyle Seeback]

You are perfectly on time. That's two and a half minutes right on the button.

Ambassador, on behalf of everyone at the committee, thank you so much for coming today. Everyone here is in support of Ukraine in this very difficult time. Slava Ukraini.

I will now suspend the meeting.

[The Vice-Chair, Conservative, Kyle Seeback]

Welcome back for our second hour today. We have a second panel of witnesses.

We have Roman Waschuk from the Business Ombudsman Council in Ukraine, by video conference. We have Mr. Potichny from Canada-Ukraine Chamber of Commerce, and we have Mr. Michalchyshyn from the Ukrainian Canadian Congress.

We are going to start with Mr. Waschuk. Everyone is going to have a five-minute statement. We'll have Mr. Waschuk, Mr. Potichny and then Mr. Michalchyshyn, in that order.

Mr. Waschuk, please go ahead, for up to five minutes.

[Roman Waschuk, Business Ombudsman in Ukraine, As an Individual]

Thank you, Mr. Chair.

Committee members, I am going to make my presentation in English, but I will be prepared to answer your questions in both official languages.

As Ambassador of Canada, I was present at the wrap-up of negotiations under the Harper government and the signing of the original CUFTA in 2016 under the Trudeau government—indeed a cross-party affair at the time—as well as being involved in the rollout and implementation of the agreement in 2017 to 2019.

If we look back to 2017 and up until this year and the general trade balance trend lines, we can see Canadian exports at first plateauing at a significant surplus versus those of Ukraine. Then they dipped and then rebounded by 2021, which was essentially the last full year before full-scale war.

Ukrainian exports, which of course we count as Canadian imports, grew steadily. That was in fact the policy intention, which was to support Ukraine. That was backed by a trade development project implemented by the Canada-Ukraine Chamber of Commerce and the Conference Board of Canada.

By 2021—as I said, the last full year before full-scale war—trade had settled at an equilibrium of just under $250 million being shipped each way in terms of goods, with a total turnover nearing $500 million. Ukrainian exports to Canada held steady last year despite the onset of full-scale war but have faltered this year, especially as two key contributors, the steel industry and agriculture, have been literally hard hit by bombing as well as logistical constraints caused by Russia's Black Sea blockade.

Canadian exports have risen sharply this year, if you look at the year-to-date data on the much-appreciated Ukrainian side in the form of tanks, guns and ammunition as well as UAV components. In fact, if you look at the statistics, two-thirds of this year's record-breaking amount of Canadian exports are in fact weapons systems.

Things have also started changing in other areas. There's a strategic two-way trade starting in the nuclear power sector. Just in the past couple of months, Ukraine has begun shipping uranium ore for processing—because Ukraine has its own uranium mines—by Cameco in Canada, which will in turn provide fuel-grade uranium to Canadian-owned Westinghouse for the manufacture of fuel rods that will go into Ukraine's operational nuclear power plants. This cuts Russia out of the picture and ensures value added for both Canada and Ukraine.

I think that answers one of the questions from one of the honourable members in the previous session. Are there ways in which Canada and Ukraine on the trade side can work together to increase Ukraine's energy independence? This is certainly one.

CUFTA's modernization is also important in that it is expanding coverage to trade in services and modernizing investment protection. Trade in IT services, especially software development, has been a major part of the Canada-Ukraine economic relationship, with Canada in or near the top 10 of Ukraine's international IT export markets. This has overall been a win-win situation for Canadian companies in giving them access to high-level mathematical and engineering skills to generate their own product. It has resulted in, of course, product benefits to Canadians as well. If you're using Grammarly, for example, to improve your writing output, you're relying on Ukrainian technology.

Ukrainian IT companies are also now creating jobs in Canada, and not only in software. Ajax Systems, Ukraine's European leader in home and business security systems, has teamed up with Inaxsys of Montreal, which is the biggest Canadian independent player in the security space, to provide home and company monitoring solutions across Canada.

Canadian investment, which will now also be better protected under the agreement with Ukraine, is modest but it is prominent in some market segments. Fairfax Financial, which you no doubt know, is the undisputed leader in the Ukrainian insurance market, owning three of the top 10 companies. It is also expanding its presence in the agri-food sector. Perhaps counterintuitively, both of these business units are continuing to grow as Ukrainians moving to and from shelter in countries abroad need auto and health insurance, ensuring that market grows. Also, people home and abroad still need to be fed.

My current day job as business ombudsman for Ukraine is monitoring and ensuring the implementation of the Ukrainian legislative safeguards for business, handling complaints from individual businesses and making systemic recommendations for improvements, and that's supported by the European Bank for Reconstruction and Development and a consortium of western countries.

The imminent opening of—

[The Vice-Chair, Conservative, Kyle Seeback]

I have to interrupt. You're at five and half minutes. I apologize but we're going to have to move on now.

We will move to Mr. Potichny for five minutes.

[Zenon Potichny, President, Canada-Ukraine Chamber of Commerce]

Thank you very much.

Ladies and gentlemen, as president of the Canada-Ukraine Chamber of Commerce, I stand before you today to underscore the profound importance of modernizing the Canada-Ukraine Free Trade Agreement, emphasizing the key changes needed for the prosperity of both nations and highlighting the critical role and place of Ukraine's postwar recovery and reconstruction, as well as its potential to engage Canadian companies in this vital endeavour.

The original CUFTA was established in 2017, and we have been involved in this a bit. As former ambassador, Mr. Waschuk, mentioned, we were part of the project CUTIS as well. The old CUFTA, as I call it, has been a symbol of economic co-operation and partnership, but the modernization of this agreement is crucial to reflect the changing dynamic of the global economy as well as the challenges Ukraine is currently facing due to the Russian full-scale invasion.

I also would like to underscore that the old trade agreement had a main focus in the area of tariff reduction and elimination, and it has done a great job. Most of the tariffs are removed, and I think all of them will be removed by the end of February.

However, there are important new chapters in this modernized free trade agreement. A lot of things are on trade and services that had been missing before. IT has been already mentioned, and quite a few Ukrainian companies even opened offices already in Canada. There are also chapters on finances, non-tariff barriers, e-commerce and environmental labour standards.

I would just like to underscore that trade in services and finances are going to be very crucial in the rebuilding of Ukraine. We're talking about probably the largest reconstruction project in the world, the numbers that are being thrown around now are $750 billion to perhaps even a trillion dollars. It is giving not just a huge opportunity to help Ukraine but also a huge opportunity for Canadian companies to take part in that. It's not a secret anymore because, right after the signing of the modernized free trade agreement by the President of Ukraine and Prime Minister of Canada, there was an MOU signed between a known Canadian company, Aecon, and Ukrhydroenergo, which is a producer of hydro energy in Ukraine. These kinds of projects are multi-billion dollar projects. They will happen and they will be done much easier and faster with this modernized CUFTA.

The modernization of CUFTA holds a unique potential to engage Canadian companies in the reconstruction of Ukraine. Canada has a history of providing support and assistance to Ukraine, and this is a pivotal moment to further strengthen the partnership. By modernizing the agreement, we can create incentives and opportunities for Canadian businesses to invest in Ukraine's reconstruction efforts. This will not only bring much-needed capital to the country but also foster technology, technological transfer and knowledge sharing that can accelerate Ukraine's postwar recovery.

In conclusion, the modernization of the Canada-Ukraine Free Trade Agreement, with the key changes outlined, is crucial for Ukraine's postwar recovery. These changes will fortify our friendship and partnership, while sending a strong signal to the world about our commitment to responsible and ethical trade and services practices. Morever, it has the potential to engage Canadian companies in the crucial task of reconstruction in Ukraine, fostering economic revitalization and reinforcing the bond between our nations. I urge all of you to support this initiative, recognizing its vital role in Ukraine's recovery and the opportunities for Canadian companies.

Thank you very much.

[The Vice-Chair, Conservative, Kyle Seeback]

Thank you, Mr. Potichny.

Now we will turn to Mr. Michalchyshyn for five minutes as well.

[Ihor Michalchyshyn, Chief Executive Officer and Exective Director, Ukrainian Canadian Congress]

Thank you.

I wish my esteemed co-panellists were here in person with me, but I know that we will see each other at the Rebuild Ukraine Business Conference in Toronto on the 21st and 22nd. I invite all of you to join us there as well.

It's my honour to be here today representing the Ukrainian Canadian Congress, which acts as the federation and the voice of Canada's Ukrainian community. Since 1940, we've been working to lead, coordinate and represent our community and to shape Canada's social, economic and political policies.

We're very grateful to all Canadians for their generous support of Ukraine and the Ukrainian people at this time as Russia wages a genocidal war on Ukraine and its people. We will never forget the kindness that Canadians have shown Ukraine, including sheltering more than 200,000 Ukrainians in Canada. Dyakuyemo.

Russia’s war against Ukraine has had devastating human costs. Tens of thousands have been killed, and thousands more have been wounded. Millions have been displaced from their homes—including coming here to Canada—which has caused the greatest humanitarian disaster in Europe since World War II. Russia’s war has also had devastating economic consequences for Ukraine. Its GDP contracted by about 30% in 2022. As you've heard today, estimates on the reconstruction costs vary, but they all involve billions or trillions.

While destroying Ukraine’s infrastructure and the homes of Ukraine's people, Putin’s Russia has been unable to destroy that which it hates most: an independent Ukraine and a pluralist Ukrainian nation united in its aspiration to join the European community. Just this week, the European Commission made the historic determination that Ukraine is ready to open EU accession negotiations. The negotiation process is long and complicated, but Ukraine’s path to EU membership is now irreversible. Russia’s colonialist delusions have failed.

It is in this context that the modernization of the Canada-Ukraine Free Trade Agreement is so important, and this is why the UCC strongly supports the swift adoption of this modernized agreement. We believe that Ukraine's further integration with the EU and with NATO—with which Canada can be of great assistance—is the key to Ukraine's future success. This future success of Ukraine is both in our national security interest and in the economic interest of Canada and of all of our allies, including the United States and Europe.

As Canada also has a free trade agreement with the EU, the adoption and implementation of standards that apply across the board are important for Ukraine’s economic development, the strengthening of the markets and trade ties to rebuild better, as the ambassador said.

There are three main points that we believe are critical.

The first is to ensure that Export Development Canada actively supports Canadian investment in Ukraine with a full suite of products and export insurance. Canada risks being left behind if we don’t join other national export and credit agencies and multinational institutions—such as the European Bank for Reconstruction and Development, the U.S. International Development Finance Corporation, the British International Investment company and others—that are providing some certainty to investors from their countries.

Second, we strongly support legislative and regulatory changes that would allow for the seizure and repurposing of Russian state assets and Russian oligarchs' assets currently frozen in western banks and institutions. For example, some of you may have heard about Bill S-278 in the Senate. We encourage this committee to examine this issue and see how it would impact both trade with Ukraine and postwar reconstruction efforts.

Finally, and most importantly, discussions about increasing trade and economic activity must rely on the Ukrainian victory, which will be the ultimate economic and trade benefit for Canada and Ukraine. As long as Russia continues to wage war, the human costs will rise, as will the economic costs and the costs of lost potential. Therefore, we urge all MPs in this committee and in Parliament to support greater investments in Canadian arms and armaments manufacturing to support the substantial increases in military aid from Canada to Ukraine that will lead to this Ukrainian victory.

There will be, in the future, important opportunities for co-operation in the defence and security sectors—joint ventures, joint production and so forth that will be developed. The reality is that, even after victory, Ukraine will have to be well armed. Canada can help in this.

One day I hope to appear before this committee so we can discuss further Canadian investment opportunities in a Ukraine that is peaceful in its internationally recognized borders and firmly anchored in the European Union as a whole, free and peaceful nation.

Thank you. I am looking forward to your questions.

[The Vice-Chair, Conservative, Kyle Seeback]

Thank you very much.

We will start the first round.

Mr. Martel, you have the floor for six minutes.

[Richard Martel, Conservative, Chicoutimi—Le Fjord, QC]

Thank you, Mr. Chair.

Thanks to the witnesses for being with us. I am happy to be able to speak with them.

Mr. Waschuk, what was your role in 2015 when the first agreement was signed?

[Roman Waschuk]

I was Canada's ambassador in Ukraine at the time.

[Richard Martel, Conservative, Chicoutimi—Le Fjord, QC]

Did you have any input during the negotiations?

[Roman Waschuk]

It was mainly the professional trade negotiators from Ottawa who made the decisions about the details, but I was always aware of what was happening. Ultimately, there was a bit of haggling to be done, especially regarding the preservation of the Canadian supply management system for the dairy industry. That was mainly the job of the trade policy and negotiations team at the department.

[Richard Martel, Conservative, Chicoutimi—Le Fjord, QC]

Mr. Waschuk, since you knew what was happening in Ukraine, can you tell us whether it had concerns about Ukraine being energy-dependent on Russia at that time?

[Roman Waschuk]

I do not think that energy issues dominated those discussions, because at that time Canada was not a potential supplier of energy to Ukraine. As I said earlier about the nuclear power sector, it was not yet in evidence. The issue was really goods, not energy.

[Richard Martel, Conservative, Chicoutimi—Le Fjord, QC]

Today, we have questions, we have concerns, regarding this new agreement. Representatives of the government told us on Tuesday that the subject of energy security had not been addressed during the discussions about modernizing the agreement.

Given the geopolitical situation with which you are quite familiar, which has obviously changed since the most recent negotiations, it seems essential to me that we talk about energy security at this time.

What do you think?

[Roman Waschuk]

Yes, that is a factor, and I see signs of progress, particularly in the nuclear power sector.

[Richard Martel, Conservative, Chicoutimi—Le Fjord, QC]

Would it not have been worthwhile to include more details in this new agreement about energy and the energy sector? There is nothing at all about it in the modernized version. We cannot tell whether there are agreements possible. I know things can be added later, but could there have been provision in the agreement? There are details concerning some sectors, but there is absolutely nothing about energy.

What do you think?

[Roman Waschuk]

Keep in mind that I am no longer working for the Department of Foreign Affairs, Trade and Development. However, I think natural gas and oil, for example, are basic products that are rarely limited by trade agreements. They are sold on the international markets, and a chapter about those products, which are traded pretty freely all over the world, is not really necessary. I am not an expert on the energy sector, so it is hard for me to say whether it would have been possible to include anything about the subject in this agreement.

[The Vice-Chair, Conservative, Kyle Seeback]

We'll now turn to Mr. Sidhu for six minutes.

[Maninder Sidhu, Liberal, Brampton East, ON]

Thank you.

Thanks to our witnesses for joining us here today in this very important discussion on the modernization of the trade agreement.

I met with the UCC recently. It's a well-respected voice in the Ukrainian diaspora and the business community. Your advocacy is critical in helping Ukraine rebuild, as well as assisting both our economies and sectors create jobs here in Canada and in Ukraine, as we heard from the ambassador earlier today.

I'd like to know from the UCC how important it is to you at the UCC and in the business community to have this modernized trade agreement adopted without delays.

[Ihor Michalchyshyn]

Mr. Potichny can speak to it more specifically through the chamber of commerce, but as I said, every week and every month, we're hearing from companies in Ukraine and companies in Canada that are eager to do business, or are doing business and want to expand. Many of those companies will be at the conference in Toronto, or were at the conference last year.

I think with the influx of more than 200,000 Ukrainians in Canada, those person-to-person ties have increased greatly. We see, as the ambassador said earlier, that Ukraine has a priority on economic growth. The 30% GDP loss is a huge hit, but notwithstanding that, the Ukrainian economy continues and the banking system continues.

As our other speakers have said, there's a lot of potential, but as I've said, I think the potential is all contingent on the war ending in a positive way for Ukraine, which will then allow for the assessment of the exact dollars and figures. I think Ukraine is eager to include this as a step forward in its negotiations on a global level.

[Maninder Sidhu, Liberal, Brampton East, ON]

Thank you for sharing those insights.

Mr. Waschuk, turning to you, I really enjoyed the insights you provided into technology companies and mutual co-operation in both Ukraine and Canada. I know your opening remarks got cut off, but I'm hoping you'd like to finish some of those. I'm really intrigued to hear what more you have to say.

[Roman Waschuk]

I had another sentence or two, and they were focused on the modernizing impact on Ukraine of the beginning of the accession talks with the European Union, but also of the provisions of the modernized CUFTA.

Essentially, within probably four or five years, Ukraine will be inside the EU. It's already largely inside the single market. It will soon be within the EU's common mobile roaming zone, which means it will be a much cheaper place to have a mobile phone than Canada. It means that it will be part of our broader Euro-Atlantic system.

You need to think of CUFTA being modernized, yes, but ultimately, it may in fact be a transitional measure, because if Ukraine succeeds in acceding to the EU, it will be part of CETA—the Canada-EU trade agreement—likely by 2030. That also means that the harmonization of standards, which are very high in CETA and are being upgraded in CUFTA, will make it better and easier for Canadian companies to trade goods and services that are interoperable with Ukraine, because they're designed to be interoperable with the EU. Ukraine's EU accession also makes it an easier market to work with for Canadian companies.

[Maninder Sidhu, Liberal, Brampton East, ON]

Thank you for those insights.

Turning back to the UCC, we mentioned agriculture and the importance that agricultural technology can play as we move forward to help Ukraine rebuild. Can we speak to that sector and some of the importance around the sector? Maybe give some examples of how Canada and Ukraine are working together.